Energy Transfer Partners to buy sister company in $11.2 billion deal

HOUSTON — Energy Transfer Partners said Monday it would buy sister company Regency Energy Partners in an $11.2 billion deal, including about $6.8 billion in debt.

The purchase would bring together two companies both controlled by parent company Energy Transfer Equity, L.P. in a cash-and-stock deal. Dallas-based Energy Transfer Equity controls the general partner and incentive distribution rights of the two companies, as well as owns a large stake in both.

Under the terms announced, unitholders of Regency will receive 0.4066 Energy Transfer Partners common units and a cash payment of $0.32 for to total a price of $26.89 per unit, based on Energy Transfer Partners’ closing price on Jan. 23.

The price is a 15 percent premium to the average price of Regency’s common units for the past three trading days ending Jan. 23, the company said.

The purchase will make Energy Transfer Partners the second largest master limited partnership, the company said. Master limited partnerships are tax-advantaged corporate structures that require companies to pass along cash to shareholders, called unitholders.

The deal will also restructure the amount of cash Energy Transfer Partners is required to pass along to its parent company, Energy Transfer Equity, by a total of $320 million over a five-year period.

In August, pipeline giant and then-master limited partnership Kinder Morgan announced it was combining several companies in a $44 billion transaction. Behind that deal was also a push to restructure Kinder Morgan’s required cash transfers between its companies and to simplify its corporate structure.

The acquisition will leave Energy Transfer Partners with a foothold in regions such as the Permian Basin, the Eagle Ford Shale and the Marcellus and Utica shale plays, the company said in an announcement.

“In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment grade balance sheet, to continue its growth,” said Mike Bradley, CEO of Regency, in a statement.

Combined across several companies, Energy Transfer owns and operates approximately 71,000 miles pipelines, the company said.